The Monetary Authority of Singapore (MAS) has recently announced further details regarding the updates to the Financial Sector Incentive (FSI) scheme highlighted in 2013 Singapore Budget speech earlier this year. In the announcement, it said a list of qualifying activities incentivised under the FSI scheme will be expanded from 1 January 2014.
The FSI scheme aims to promote and encourage the development of Singapore’s financial services sector. It awards concessionary Singapore corporate tax rates of 5%, 10%, and 12% on certain income derived from qualifying financial service activities conducted in Singapore. Initial award periods may vary from 5 to 10 years based on headcount and scope of activities undertaken.
For the uninitiated, there are two tiers of qualifying FSI activities – standard and enhanced. A broad range of qualifying activities, including lending, debt and equity capital markets, treasury, trust administration as well as Headquarter Services and Qualifying Processing Services Company (FSI-HQ) services fall under the standard tier. With effect from January next year, the FSI-ST will be expanded to include qualifying Islamic Finance Activities.
Under the enhanced tier, a category for high-growth and high valued added services, several of the FSI sub-schemes will merge from 1 January 2014. For example, the FSI-Bond Market (FSI-BM) and FSI-Equity Market (FSI-EM) schemes will merge to form a new FSI-CM scheme. The five separate FSI-Derivatives Market (FSI-DM) sub-schemes will also merge into a single FSI-DM scheme. These changes will not affect existing award holders.
Withholding tax exemption will be granted automatically on interest payments made by FSI-HQ award holders on loans, with effect from 25 February 2013. In addition, new applicants for the FSI-Fund Management (FSI-FM) award will need to satisfy an additional an Asset under Management (AUM) requirement of at least S$250 million.
Apart from the FSI-Islamic Finance (FSI-IF) scheme whose deadline has expired, the application period for the FSI scheme will be extended to 31 December 2018.
The new FSI sub-schemes will be as follows:
| Scheme | Concessionary tax rate (%) |
|---|---|
| FSI-Standard Tier (FSI-ST) | 12 |
| FSI-Headquarter Services (FSI-HQ) | 10 |
| FSI-Fund Management (FSI-FM) | 10 |
| FSI-Capital Market (FSI-CM) | 5 |
| FSI-Credit Facilities Syndication (FSI-CFS) | 5 |
| FSI-Derivative Market (FSI-DM) | 5 |
For more information on the FSI, please visit Singapore Tax Incentives page.
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